By @NY Staff
Silicon Alley Web hosting firm Globix Corp.
plans to file for Chapter 11 bankruptcy protection next month after securing a deal with bondholders to reduce the debt burden by approximately $480 million.
Globix, struggling to cope with to lease terminations, severance packages, bad debts and troubles with suppliers, has reached a deal on financial restructuring designed to ensure the financial stability of the Company.
Under terms of the prepackaged bankruptcy deal, Globix bondholders (who own more than 51 percent of the company’s outstanding $600 million of 12-1/2 percent senior notes) will exchange those senior notes for $120 million and a substantial equity position.
The notes, due in 2008, carry an interest of 11 percent and will reduce annual interest payments by about $75 million. Globix said its preferred shareholders have also agreed to this plan.
Globix, which plans to file for bankruptcy protection sometime in February and emerge from the process “relatively quickly,” said there would be no cash interest payable on the new senior secured notes for up to four years.
“Additionally, the bondholders will hold 85 percent of the company’s common stock. Current holders of the company’s Series A preferred will hold 14 percent of the common stock, and the remaining 1 percent will be allocated to the current common shareholders,” according to a Globix statement.
Globix, which plans to exclude its U.K and European operations from the bankruptcy petition, said customers, employees and trade creditors would not be affected by the restructuring.
Globix, which has been scaling back its data hosting operations at sites around the globe, took an $18 million restructuring charge during the fourth quarter last year, which included the termination costs of leases, write-off of leasehold improvements, excess equipment and employee termination costs.